But that's actually not what's worrisome about the numbers. (The company's operating and net income were hit by a couple of items that appear to be "one-time" in nature, so the adjusted operating profit would be higher than reported).

What's most worrisome about Zynga's Q2 are the trends in active users and revenue.

Here are charts of Zynga's revenue (dark blue) and "bookings" (light blue), as well as EBITDA (dark green), and net income (light green).

Well, in short, revenue rose by about 15% sequentially... and costs rose nearly 30%. Some of the costs appear to have been one-time in nature--payments to former employees, etc. But even when you eliminate those, costs still rose faster than revenue, which is not good news.

(With more than $1 billion of revenue, Zynga has plenty of scale. By now, it should be nicely--and increasingly--profitable).

To understand the concern here, you need to understand the difference between Zynga's "bookings" and "revenue."

"Bookings" are the more meaningful measure of the company's sales in a period. They include all revenue generated in the period through sales of virtual goods (Zynga's main revenue-generating product). Zynga's game-players buy virtual goods to use in games, and every dollar they spend in a given quarter goes into "bookings."

"Revenue," meanwhile, does not represent the amount of goods sold in the period. Rather, it is the sales of virtual goods amortized over the expected life of the virtual goods--or as the goods are consumed.

The reason bookings are the more meaningful measure is that they show the purchasing activity of Zynga's customers in a given period. The "revenue" figure, meanwhile, is based on internal assumptions about "average life of virtual goods."

Because "revenue" includes goods bought in many prior periods in addition to the current period, it is a lot smoother. It also does not reflect what happened in a given period.

And that brings us to Q2...

Let's look again at the left-hand chart above (right). The dark blue line, revenue, was up nicely sequentially, suggesting that Zynga had a good quarter.

But the light blue line, bookings, was actually down sequentially.

In other words, Zynga sold less stuff this quarter than it did last quarter, despite apparently being in an early phase of its growth cycle.

Now, it's important to remember that Zynga relies on "hit" games and so its business will always have an element of cyclicality. Poor figures one quarter aren't necessarily a problem, and indeed it's been a while since Zynga had a big hit game, so it's possible that this is just a temporary drop.

But it is still safe to say that, if Zynga were a public company, its stock would have been clobbered on these results.

Even more worrisome, moreover, is the underlying cause of this revenue problem.

ZYNGA'S ACTIVE USERS HAVE BEEN FLAT FOR MORE THAN A YEAR

Over the past year, Zynga has been acquiring game-development companies like mad, bringing their users with them.

And yet Zynga's monthly active users have been flat for five quarters now. And in the most recent quarter, they actually declined.

As the chart below shows, Zynga's monthly active users (MAUs) have been stuck shy of 250 million since Q1 '10, and they declined in Q2 '11.

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What this means is that, since 2010, the company's revenue growth has come mostly from revenue operational efficiencies--i.e. wringing more cash out of existing users--and acquisitions, rather than from growing its user base.

Zynga will almost certainly go public at a rich valuation, which means that investors will be anticipating high growth. And while revenue and operational efficiencies and acquisitions have taken the company a long way, the only way Zynga can compellingly grow over the long term is through organic user growth.

The biggest question the company needs to answer for prospective IPO investors, therefore, is how it plans to boost user growth.

One possibility is that Zynga has exhausted how many new users it can get from the Facebook platform and expects new growth to come from other platforms, particularly Google+ and mobile games. But although the overlap between these platforms is increasing, mobile games have different product, business and distribution dynamics than social games.

In other words, for Zynga to tell a persuasive long-term growth story, it needs to explain better how it will achieve strong user growth, and how it will leverage its current success on Facebook to win on other platforms.

Because, for a company planning to go public as a major new "growth story," these results are horrible.

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